S&P Cuts Euro Zone's Rescue Fund EFSF To AA+

2012-1-19

(RTTNews) - Rating agency Standard & Poor's said Monday that it lowered the long-term issuer credit rating on the European Financial Stability Facility, EFSF, to 'AA+' from 'AAA' and affirmed the short-term issuer credit rating at 'A-1+'.

The rating agency said it removed the ratings from CreditWatch, where they had been placed with negative implications on December 6. The outlook is developing.

The move comes three days after S&P lowered to 'AA+' the long-term sovereign credit ratings on two of the EFSF's previously 'AAA' rated guarantor member states, France and Austria.

The rating agency noted that the EFSF's obligations are no longer fully supported either by guarantees from EFSF members rated 'AAA' by Standard & Poor's, or by 'AAA' rated securities.

"We consider that credit enhancements that would offset what we view as the now-reduced creditworthiness of the EFSF's guarantors and securities backing the EFSF's issues are currently not in place," S&P said. "We have therefore lowered to AA+ the issuer credit rating of the EFSF, as well as the issue ratings on its long-term debt securities."

The developing outlook on the long-term rating reflects the likelihood the rating agency currently see that it may either raise or lower the ratings over the next two years.

The European Financial Stability Facility is a special purpose vehicle financed by members of the eurozone to combat the European sovereign debt crisis. It was agreed by the 27 member states of the European Union on May 9, 2010, aiming at preserving financial stability in Europe by providing financial assistance to eurozone states in economic difficulty. The EFSF is authorized to borrow up to ?40 billion, of which ?50 billion remain available after the Irish and Portuguese bailout.